K.C. SRIVASTAVA, A.M. These are two departmental appeals directed against order of CIT(A) Agra and relates to asst. yr. 1971-72 and 1972-73. 2 . assessee is deriving income from glass work factory at Shikehebad. While making assessment ITO found that assessee-firm had paid certain amounts for purchase of raw-materials required in its business. These payments exceeded Rs. 2, 50but payments had not been made by crossed cheques or drafts. After considering explanations given by assessee, ITO held that these payments could not be allowed in view of provisions of s. 40A(3) of IT Act. There were in all four payments which were disputed and addition of Rs. 58,909 was made in asst. yr. 1971-72 and addition of Rs. 12,273 was made in year 1972-73. disallowance was upheld by AAC and assessee filed appeal before Tribunal. Tribunal took up these appeals alongwith some other appeals of same assessee relating to some other years. Tribunal orders are in ITA No. 8 and 2760(DEL) 77-78 for these two years and order of Tribunal was passed on 16th April, 1980. Tribunal found that this question of disallowance under s. 40A(5) had not been considered by ITO and AAC in terms of Circular No. 2 20 dt. 31st March, 1977. Tribunal, therefore, set aside orders of AAC and restored it to his file for fresh disposal in light of said circular and in accordance with law. 3. Though it is not directly connected which present appeals, it may be mentioned that Tribunal also disposed of departmental appeals for years 1974-75 and 1975-76 where CIT(A) had set aside order of ITO on certain points and had directed him to decide issues. Tribunal, however, directed that CIT(A) himself should look into this matter and decide it on basis of facts available. 4. It is in these circumstances that present order were passed by CIT(A) was passed by him. After considering facts he applied Board's Circular No 2 20 dt. 31st May, 1977 and held that no part of assessees claim could be disallowed as they were covered under that instructions prescribed by Boards Circular. He, therefore, deleted additions under s. 40A(3) in both years. 5. Before us Department has taken following grounds: 1. "The learned CIT(A) has erred in law and on facts in deciding appeal as jurisdiction over this case for assessment year under consideration lies with AAC in terms of clarification made vide Circular No. 269/71/80 ITJ dt. 29th April, 1980 (CBDT Bulletin Tech. Vol. XXVI 1st April-June 1980)." 2. "The learned CIT (A)has erred in law and on facts in deleting addition of Rs. 59,909 & 12,000 made under s. 40A(3) in respect of payments made in cash exceeding Rs. 2, 50as payment does not fall within cl. (b) of para 4 of Boards Circular No. 2 20 dt. 31st May, 77 (CBDT Bulletin Tech. XXIII-3)." 3. "The order of learned CIT (A)being erroneous in law and on facts be set aside and order of ITO be restored." 6 . Making submission on first ground ld. departmental representative submitted that appellate order in present case should have been passed by AAC and not by CIT(A) and for this he relied on Circular No. 269 of 1980. In this Circular certain clarifications were given regarding jurisdiction of CIT(A) in light of provisions of s. 246(2) of IT Act and subsequent notifications. This circular was in form of questions and answers where Board had sought to clarify legal position on this subject. reference was made to sub-s. (2) of s. 39 of Finance (No. 2) Act, 1977 by which posts of CIT(A) were created. It was clarified that in respect of order passed by AAC before appointed day where Tribunal directs after appointed date that matter should be remanded to AAC or set aside for fresh disposal then any action required to be taken had to be taken by AAC and not by CIT(A). It was clarified that where Tribunal passed on order before appointed day setting aside order and directing fresh disposal it would become pending appeal and would stand transferred to CIT(A). However where Tribunal passed order after appointed date power to take follow up action would be with AAC and not with CIT(A). It may be mentioned that appointed date for purpose of non company assessee was 10th July, 1978. In view of this circular it was contended that ld. CIT(A) had no jurisdiction to hear this matter after set aside order of Tribunal and proper jurisdiction was only with AAC. 7 . ld. counsel for assessee raised preliminary objection to admission of this ground and he submitted that this ground should not be admitted at all. He contended that ground itself refers to Circular of Board which has no legal sanction and it was only for guidance and information of Departmental Officers. He also submitted that matter was heard by CIT(A) after giving due notice to ITO and ITO has not chosen to raise question of jurisdiction before CIT(A). He, therefore, contended that in absence of any objection taken before first appellate authority it was not open to Revenue to take up this ground before Tribunal. He further submitted that Department cannot have grievance against order of ld. CIT(A) in so far as question of jurisdiction is concerned. CIT(A) was more senior officer who has applied his mind and has decided matter on merits. In this connection, he further pointed out s. 246 (2) which provided for appeals to CIT(A) has made specific mention of such orders which are made as result of directions issued by IAC under s. 144B. He, therefore, contended that this was case where law itself had conferred jurisdiction on CIT(A) as order was passed after obtaining directions of IAC as required under s. 144B. He also pointed out that assessed income of assessee was more than Rs. 7 lacs whereas cases of more than Rs. 1 lac. income for non-companies had been kept under jurisdiction of CIT(A). He further submitted that circular issued by Board was not in accordance with law. In this connection, he drew our attention to provision of s. 246 and contended that there was no provision in this section whereby this matter could go back to AAC. He submitted that while matters pending before appointed date and any matter arising out of or connection with such appeal stood transferred on that date to be CIT(A) matters which would come from Tribunal as result of order passed after appointed day would also be such matter and jurisdiction lie with CIT(A). He pointed out that while making provision for another category of first appellate authority Finance (No. 2) Act, 1977 provided in s. 39 of that Act that any action required to be taken after commencement of this section in relation to any appeal disposed of by AAC may be taken by AAC himself. He however, contended that hearing of in appeal and deciding issue on merits should not be considered as any action required to be taken and such action should be defined to only rectification or giving effect to directions regarding verification of certain facts. It was, therefore, contended that under law category in which assessee fall was to be under jurisdiction of CIT(A) and therefore, there was no error when CIT(A) passed this order. He also pointed out to anamoly of situation that if order of Tribunal was passed before appointed date appeal would still be transferred to CIT(A) but if order of Tribunal was passed after appointed date it will go back to AAC himself. He contended that this would be wrong interpretation and effort should be made to avoid any such interpretation which makes position look absured. In end it was pointed out that this ground does not arise out of order of CIT(A) as he had no possession to decide this matter as no party raised it before him. Tribunal, it was submitted, should not exercise its discretion in admitting this ground. It does not arise out of order of CIT(A). He contended that permitting Revenue to raise such frivolous ground when senior officer was applied his mind and has decided case on merit, would result in unnecessary assessment and delay in adjudication of assessee's claims. 8. We have carefully considered rival arguments on this extra-ordinary ground taken by Department. When senior appellate authority was created, intention was that more important appeals and particularly matters where IAC had been associated with assessment or any other proceeding appeal should be heard by Officer of rank of Commissioner. It was in view of this that various amendments were made as per Fifth Schedule added to Finance (No. 2) Act, 1977. case of assessee was in category where normally appeal had to be filed before CIT(A) as IAC had approved order and had given instructions under ss. 144B and 144A as well. However in this case assessment was made on 12th Feb., 1976 when there was no post of CIT(A). AAC had decided matter and appeal had come before Tribunal. As order was by AAC Tribunal had to set aside order to AAC. Now provisions of s. 246(2) provided circumstances where appeal would lie to CIT(A) and s. 246(3) provided that all such appeals pending before appointed date and any matters arising out or connection with such appeal which are so pending would stand transferred to CIT(A) provided appeal is of such nature which would fall under s. 246(2). position regarding matters which were already before t h e Tribunal was not laid down in clear terms. For example, if Tribunal passed order before appointed date and matter was set aside to AAC appeal would become pending before him and it will have to be transferred to CIT(A) as required under s. 246(3). However, where Tribunal passed order after appointed date only provision to which our attention has been drawn is under s. 39(2) of Finance (No. 2) Act, 1977. Here it is provided that if AAC has passed order before appointed date and any action, is required to be taken after commencement of that section, only AAC would take action. This would certainly cover matters of rectification, etc. of AAC's order. However, it is not very clear whether hearing of appeal afresh on one point or as whole would be considered as "any action required to be taken". It is this position that Board sought to clarify in its circular. There can certainly be some debate regarding correctness of interpretation placed by Board's Circular in respect of such cases where appeal has been set aside and first appellate authority has to pass afresh order. If on that date it is considered as fresh appeal it will have to go to Commissioner(A). Obviously attention of ld. CIT(A) had been drawn to Circular and ITO had also not raised any objection before him about his jurisdiction. It is true that jurisdiction cannot be conferred by consent but in circumstances of present case difficulties arose as result of interpretation of provisions of law. Notification and of Finance Act. 1977. In fact none of these were considered by CIT(A) and one can very well understand that first appellate authority who was dealing with case of assessee for several other years would not think it necessary to go suo motu into question of jurisdiction for another year of same assessee. 9 . Thus we find that in present case there was no inherent lack of jurisdiction in CIT(A) who was not only dealing with other cases of assessee, but also looking to nature of assessment order it was he who could be proper authority to hear appeals on merits. In such case question arises whether on this issue we should set aside order of CIT(A) and either direct him to go into question of jurisdiction or restore matter to AAC for fresh disposal on merits. Having carefully considered whole matter. I am of view that no such action is called for in this case. As already stated in earlier part of this order, this is second time that matter has come up before Tribunal. comparatively senior officer like Commissioner(A) has applied his mind and has decided appeal on merits. As we will be discussing in following paragraphs we agree with his conclusions on facts of case and we find that his order is in conformity with Board's beneficial circular explaining provisions of s. 40A(3) of IT Act. In such situation setting aside order of CIT(A) or directing comparatively junior authority to apply his mind to merits of case will have no meaning particularly when in case of conclusion being different matter would again come before Tribunal. Various forums of appeal are meant to provide substantial justice to parties and any situation in which appellant is sent from piller to post for no fault of his should be avoided. We, therefore reject first ground. 10. I have now to dispose of other ground taken by Department as both parties have addressed their arguments before us on this issue as well. ITO as stated above, has made addition of Rs. 58,909 under s. 40A(3) on ground that payments were made in cash for bills which were in excess of Rs. 2, 50each. It appears that ITO had actually suggested larger addition but IAC had reduced it to Rs. 58,909. This relate to four parties and earlier order of Tribunal had directed first appellate authority to consider these in light of Board's circular where certain examples had been given for exceptional circumstances in which additions should not be made under s. 40A(3). 11. first addition was in respect of Rs. 10,668 where some purchases were made from M/s Bansal Chemicals, Firozabad. Three items were just marginally above Rs. 2, 50and fourth item was for Rs. 3,160. Before marginally above Rs. 2, 50and fourth item was for Rs. 3,160. Before CIT(A) it was pointed out that besides fact that most of items were only marginally above Rs. 2, 50being in excess by Rs. 2 or Rs. 3 only, payment should be allowed as deduction as party from whom purchases were made had insisted on cash payment. Reliance has been placed on rule 6DD(i) r/w Circular of Board. CIT(A) found that stock position of appellant of raw-material was nil on date when they were purchased and assessee was in badly need of those chemicals. He also found that several other purchases have also been made from same party which were less than Rs.2, 50and be therefore, all-wed. There was no doubt about identity of party or genuineness of transaction. After looking into cash memos, purchase bills and having regard to Board's circular CIT(A) deleted this addition. 12. Another addition of Rs. 6,938 was made in respect of cash purchases made from Nand Lal Paliwal & Bros., Firozabad. In this case purchases were made at Firozabad, whereas assessee was located at Shikohabad. assessee was not having bank account at Firozabad and as party was demanding payment in cash, payment was made in cash. CIT(A) found that case of assessee fell under exception given in Board's Circular, where it was provided that either purchaser or seller does not have bank account at place where transaction takes places, exception should be made to provision of section. He, therefore, deleted this addition. 13. Similarly addition of Rs. 4,930 was also deleted as soda ash was purchased from M/s Ashok & Co., who belongs to Firozabad, where assessee did not have bank account. CIT(A) found that this also fell under exceptional circumstances and deleted this addition. 14. last addition was in respect of Rs. 36,673 made in respect of transaction with M/s Jindal Chemicals Works, Firozabad. It was found that in all payments of Rs. 70,355 had been made to above party in cash. Here again chemicals were found to be in short supply and purchases could have been made only at Firozabad. CIT(A) found that there were large number of transaction with above party and quite substantial part was allowed by ITO himself. It was also found that assessee was having regular business dealing with above party, and assessee had no bank account at Firozabad. CIT(A) held that payments were made by appellant to said party in cash in respect of goods duly accounted for and consumed. appellant had regular accounts with said party through which these payments were made. Even in first proceedings certificate of sellers had been duly obtained. It was, therefore, held that this also fell under exceptions laid down in Board's circular. 15. Having perused order of CIT(A) and Board's Circular which has been followed by him, there is no material on basis of which we could find any error in order on ld. CIT(A). All circumstances have been duly considered by him and we would, therefore agree with conclusion of first appellate authority on merits of case. 16. For asst. yr. 1972-73 also we have perused order of ld. CIT(A) and we find that there purchases we from M/s Bansal Chemicals, Firozabad which had occurred in earlier year also and for reasons given in earlier year, it was deleted. In case of transactions by Gopi Chand Aggarwal it was found that diesel oil had been purchased at Agra and had been duly accounted for in books. It was pointed out that assessee had no bank account at Agra and there no diesel dealer takes crossed cheque or draft. Considering this CIT(A) deleted this addition. In this year also order of CIT(A) is very reasonable and Circular of Board has been correctly followed. 17. In result, two grounds taken by Department in this year are also rejected. 18. While we have disposed of above matter, it must state that Revenue could have avoided taking first ground before Tribunal and should have challenged order of CIT(A) only on merits. Here there was some confusion regarding position of jurisdiction of two first appellate authorities and CIT(A) was deciding appeals of this very assessee for many years as directed by Tribunal. Besides fact that appellants authority was not bound by Board's circular, Department did not raise any objection before CIT(A) regarding his jurisdiction. Revenue should not behave as ordinary litigant particularly when it is not prejudiced by CIT(A) passing these order. 19. appeals are dismissed. S.S. MEHRA, J.M. I have very carefully gone through order framed by my ld. brother. However, I regret my inability not to be in agreement with conclusion arrived at. facts have in detail been incorporated in order. It may briefly be stated that status of assessee is registered firm and assessment were completed on 2nd July, 1976. Disallowances were made under s. 40A(3) of Act on account of cash payments made of sums exceeding Rs. 2,000. Against that action of ld. ITO, assessee preferred appeals. ld. AAC vide order dt. 1st Feb., 1977 confirmed disallowance of Rs. 58,907 and Rs. 12,273 for asst. yrs. 1971-72 and 1972-73 respectively. On further appeal by assessee, Tribunal vide order dt 16th April, 1980, set aside ld. AAC's finding and in fact restored matter to his file i.e. ld. AAC for disposal afresh in light of Board's Circular and in accordance with law. 2. Consequent upon restoration by Tribunal and discussed above, ld. CIT, Agra came on scene, no doubt, is not clear in what circumstances and manner. In fact, restored matters, were required to be looked into by ld. AAC in terms of Tribunal's direction. Thus, while disposing of required matter, ld. CIT(A) vide two separate orders dt. 28th Dec., 1983 deleted additions of Rs. 58,909 and of Rs. 12,273, for asst. yrs. 1971-72 and 1972-73, respectively. Revenue have filed present appeals before us inter alia, on following grounds, for asst. yr. 1971-72: 1. learned CIT (A)has erred in law and facts in deciding appeal as jurisdiction over this case for assessment year under consideration lies with AAC in terms of clarification made vide Circular No. 269/71/80/ITJ dt. 20 th April, 1980 (CBDT Bulletin Tech. Vol. XXVI Ist April-June, 1980). 2. learned Commissioner of Income-tax (Appeals) has erred in law and on facts in deleting addition of Rs. 53,909 made under s. 40A(3) in respect of payments made in cash exceeding Rs. 2, 50 , as payment does not fall within cl. (b) of para 4 of Board's Circular No. 2 20 dt. 31st May, 1977 CBDT Bulletin Tech. XXIII-3). 3. For asst. yr. 1972-73, only difference involved is Rs. 12,273. 4 . To start with Revenue's first ground is required to be decided first. various dates have been mentioned earlier. Tribunal passed setting aside order dt. 16th April, 1980. In terms of Circular No. 269 of CBDT appointed date for determining jurisdiction of ld. CIT(A)/AAC was 10th July, 1978 in terms thereto if remand order restoring appeal to file of ld. AAC for disposal on particular date was passed before 10th July, 1978, in case of non-assessee company with assessed income or loss exceeding Rs. 1 lakh, ld. AAC alone will have jurisdiction to decide matter. Thus, in cases before us, in view of Tribunal's order and Circular supra, only ld. AAC had jurisdiction to dispose of restored matters. ld. CIT(A) totally lacked jurisdiction. impugned orders thus passed by him are without any jurisdiction and deserves to be quashed on that simple ground itself. Nevertheless, inconvenience to parties and fact that senior officer, applied his mind in matter are ulterior considerations not effecting point at issue i.e. jurisdiction. I thus quahs impugned order on this ground of jurisdiction itself. It view thereto, merit of matter need not be touched upon. 5. In result Revenue's appeals succeed. 23rd July, 1985 G. KRISHNAMURTHY, SENIOR V.P (AS THIRD MEMBER) Order Under s. 255(4) of IT Act, 1961 Having differed in above matters heard by us, we state below point o f difference and refer matter, to President as that he may get them decided by one or more of other members of Tribunals: decided by one or more of other members of Tribunals: "Whether on facts and in circumstances of case, Departments challenge to jurisdiction of CIT (A)was to be rejected or orders of CIT(A) were to be quashed on ground of lack of jurisdiction?" This is matter which has been referred to me by President of Tribunal, to express my opinion. These appeals were originally heard by Delhi Bench `D' and ld. Members could not agree on following point: "Whether, on facts and in circumstances of case, Department's challenge to jurisdiction of Commissioner(A) was to be rejected or orders of Commissioner(A) were to be quashed on ground of lack of jurisdiction?" 2 . Shortly stated relevant facts are ; assessee is firm deriving income from glass works at Shikohabad. ITO noticed that assessee-firm paid certain amounts for purchase of raw materials of more than Rs. 2, 50in cash. Under income-tax law payments in excess of Rs. 2, 50are required to be made by crossed cheques or drafts vide s. 40(A)(3). On view that provisions of this section 40A(3) were violated, ITO made addition of Rs. 58,909 in asst. yr. 1971-72 and Rs. 12,273 in asst. yr. 1972-73. These disallowances on appeal were affirmed by AAC. assessee then filed further appeals before Tribunal. Tribunal took up these appeals along with some other appeals of same assessee relating to some other years and insofar as appeals for these two years were concerned, Tribunal felt that matter should be reheard by AAC. By its order dt. 16th April, 1980 Tribunal set aside orders of AAC and directed him to reconsider this matter afresh in light of Board's Circular No. 2 20 of 31st March, 1977. Thereafter Commissioner(A) took up these matters for consideration and by applying Board's Circular No. 2 20 dt. 31st March, 1977 held that no part of assessee's claim could be disallowed. He was of view that those payment were covered by instructions contained in Board's circular. additions were, therefore, deleted by Commissioner(A). Aggrieved by deletion of additions made, Department filed further appeals before Tribunal for second time raising following grounds: "1. ld. Commissioner(A) has erred in law and no facts in deciding this appeals as jurisdiction over this case for assessment year under consideration lies with AAC in terms of clarification made vide circular No. 269 dt. 29th April, 1980 (CBDT Bulletin Tech. Vol. XXVI 1st April-June, 1980). 2. ld. Commissioner(A) has erred in law and on facts in deleting addition of Rs. 58,909/12,000 made under s. 40A(3) in respect of payments made in cash exceeding Rs. 2, 50 , as payment does not fall within cl. (B) of para 4 of Board's Circular No. 2 20 dt. 31st May, 1977 (CBDT Bulletin Tech. Vol. XXIII-3). 3. order of ld. Commissioner(A) having erroneous in law and in facts be set aside and order of ITO be restored." 3. Before Tribunal on behalf of Department submissions made were that in present case these appeals should have been disposed of by AAC and not by Commissioner(A) as per Board's Circular No. 269 dt. 29th April, 1980. This was circular containing clarifications regarding jurisdiction of Commissioner(A) after that authority was created and jurisdiction of AAC. This circular was in form of questions raised and answers given by Board. Reference was also made by Department to sub-s. (2) of s. 39 by which posts of Commissioner(A) were created. This circular according to departmental representative classified position that in respect of order passed by AAC before appointed day, i.e., 10th July, 1978 where Tribunal directed after appointed day than matter should be remanded to AAC or set aside for fresh disposal then any action required to be taken by AAC and not by Commissioner(A). I this case Tribunal passed order on 16th April, 1980, i.e., long after appointed day. Therefore, it was AAC, according to this circular that should have passed orders and not Commissioner(A) and thus Commissioner(A) lacked jurisdiction. Relying upon this circular objection taken to by Department was that Commissioner(A) had no jurisdiction to pass appellate order and, therefore, order must be quashed. That was also point taken up in ground No. 1. O n behalf of assessee preliminary objection was raised that this ground should not be considered by Tribunal at all because whatever may be contents of circular, when matter was heard by Commissioner(A) after giving notice to ITO, ITO should have objected to assumption of jurisdiction by Commissioner(A). Not having objected to jurisdiction of Commissioner(A) and having permitted Commissioner(A) to proceed with appeal on merits, it was not open to Department to raise question of jurisdiction for first time before Tribunal. Department could not have any grievance against order of Commissioner(A) for simple reason that he was more senior officer than AAC. Placing reliance upon sub-s. (3) of s. 246 it was urged that circular of Board could not have any application to case where order of AAC was set aside in toto and appeal was restored to file of AAC, in which case it should mean that appeal was pending before AAC and all such appeals stood transferred from that day onwards to Commissioner(A). Thus, Commissioner(A) rightly and correctly had and assumed jurisdiction to hear appeal and no objection could be taken to that. departmental representative, however, placed very great reliance upon provisions of s. 39(2) and also Board's circular and contended for contrary position. 4. ld. Accountant Member agreed with view of assessee and held that jurisdiction rightly was with Commissioner(A) and he was right in disposing of appeal and that in any case there was no grievance to Department because as against junior officer of Department senior officer came to dispose of appeal. ld. Judicial Member was, however of different opinion. He held that as per circular of Board jurisdiction was with AAC and AAC alone should have disposed of matter irrespective of fact whether he is junior officer or senior officer and notwithstanding inconvenience to parties. He, therefore, directed that order passed by Commissioner(A) should be quashed for want of jurisdiction. ld. Accountant Member after having held that Commissioner(A) had requisite jurisdiction to proceed with appeal, gave his decision on merits also. But ld. Judicial Member having held that Commissioner(A) had no jurisdiction felt that there was no need to go into merits. merits were not gone into by ld. Judicial member. Thus, only point that was decided by both Members was of jurisdiction on which there arose difference of opinion as stated above, which was referred to me by President under s. 255(4) of Act, as Third Member. 5. I have carefully perused orders passed by learned brothers and considered arguments advanced before me by both learned counsels on behalf of assessee Shri Harsh Salve and Shri A.P. Srivastava, ld. departmental representative. 6. To understand controversy it is necessary to refer briefly to legal position. By Finance (No. 2) Act, 1977 new appellate authority was created called Commissioner(A) as and from date Central Government may by notification in Official Gazette appoint. By sub-s. 2 of s. 39 certain doubts which are likely to be created by creation of new appellate authority, are sought to be removed for which provision was made in following manner: "(2) For removal of doubts it is hereby declared that any action required to be taken after commencement of this section, in relation to any appeal disposed of by AAC or Commissioner before such commencement, under any Act referred to in sub-s. (1), may be taken as if amendments directed to be made in that Act by sub-s. (1) had not been made. Sub-s. (3) of this section provided that this section shall come into force on such date as Central Government may by notification in Official Gazette appoint. Now appointed date is 10th July, 1978. What this section seeks to clarify and declare is that any action required to be taken after commencement of this section namely, 10th July, 1978 in relation to any appeal disposed of by AAC or Commissioner before such commencement, such action may be taken as if amendments directed to be made had not been made. doubt arose as to what exactly was meant by expression that any action required to be taken, used in this section. Did it mean that giving effect to orders of appellate authorities or rectification of mistakes creeping into those orders or did it mean anything else? It is only to give effect to directions given by Tribunal or n y other appellate authority, that legislature envisaged that such action must be taken only by that authority, namely, AAC. Similarly if mistake was committed by AAC in passing order, such mistakes also are to be rectified by AAC i.e. to say to limited extent of taking such action which is required to be taken, same authority is vested with jurisdiction to deal with matters. Since doubts have arisen as to what are those actions required to be taken, Board gave some clarifications by way of answers to questions and this is what Board had pointed out to all Commissioners by Circular No. 269 dt. 29th April, 1980: "Certain jurisdictional problems in regard to interpretation of provisions of section 246(2) (of IT Act) and of corresponding sections of other Direct Tax Acts, and also in regard to scope of Board's Notification issued under s. 246 (2) (i) have been referred to Board for clarification. They are posed in form of questions and answered hereunder: QuestionI1 (1) Who is to rectify any mistake in order passed by AAC before appointed day, i.e., July 10, 1978 in case of non-company- assessee where total income/loss exceeded Rs. 1 lakh, or in order passed by AAC before 1st June, 1979 in case of company? (2) Who is to comply with requirements of Tribunal for remand report or to pass fresh order in pursuance of any remand order restoring appeal to file of AAC for redisposal on particular point or entirely, if order of AAC was passed before July 10, 1978 in case of non- company-assessee with assessed income or loss exceeding Rs. 1 lakh or before 1st June, 1979 in case of company? Answer provision for removal of doubts has been made in this behalf in sub-s. (2) of s. 39 or finance (No. 2) Act, 1977 by which posts of Commissioner(A) were created. Vide para 27.5 of explanatory Notes on provisions relating to Direct Taxes in Finance (No. 2) Act, 1977 (Circular No. 229 dt. 9th Aug., 1977) Board have clarified that any action required to be taken after appointed day in relation to any appeal disposed of by AAC before that day will be taken as if amendments directed to be made by Finance Act had not been made. In other words, action in relation to such appeals will be taken by AAC concerned and not by Commissioner(A). Thus AAC may rectify any mistake in order passed by him before appointed day or take such action or pass such further orders as may be required in any appeal disposed of by him in pursuance of any remand order or other direction given by Tribunal. words `any action required to be taken' connote that requirement for any action to rectify mistake in order passed by AAC before appointed day would arise after said date. Those words in s. 39 (2) of Finance Act, 1977 would cover cases where rectification application had been filed after appointed day or AAC had issued show-cause notice on his own after that date. As for rectification application filed or show-cause notice for rectification issued before appointed day, normal rule in s. 154 that authority may amend any order passed by him would apply and same AAC or any other A C presently having jurisdiction in respect of concerned case of assessee may amend previous order. Likewise s. 39 (2) of said Finance Act would cover cases where Tribunal's order setting aside AAC's order wholly or partly was passed after appointed day, i.e. 10th July, 1978. Where order of Tribunal settings aside AAC's order for redisposal on particular point or entirely was passed before appointed day, it would be covered under s. 246 (3), being appeal pending immediately before appointed day and would stand transferred on that day of Commissioner(A). However, remand order of Tribunal requiring remand report to be submitted after enquiry on some points, whether passed before or after 12th July, 1978, would be complied with by AAC whose order was subject- matter of appeal before Tribunal." Thus, it would be seen from this circular that authority to comply with requirements of Tribunal for remand report or to pass fresh order pursuant to any remand order passed by Tribunal restoring appeal to file of AAC for disposal on particular point or entirely, was with AAC in case order was passed by AAC before appointed day. He has to take action as if amendments directed to be made by Finance Act had not been made. Then Board pointed out that AAC may rectify any mistake in n order passed by him before appointed day or take such action or pass such further orders as may be required in appeal disposed of by him in pursuance of any remand order or other direction given by Tribunal. Board also clarified that words `any action required to be taken' connote that requirement for any action to rectify mistake in order passed by AAC before appointed day would arise after said date." 7. It is no doubt true that Board has clarified later in same circular that s. 39(2) would cover cases where Tribunal's order setting aside order of AAC wholly or partly was passed after appointed day. It is relying upon these words, that departmental representative contended that fresh order to be passed pursuant to direction given by Tribunal setting aside order of AAC, must be by AAC and not by Commissioner(A). ld. Judicial member accepted this view. 8. I may mention here that reading this circular particularly these lines, on which reliance was placed by departmental representative, it gave me impression that Board is placing interpretation on s. 39(2) in such way as to equate case where Tribunal passed remand orders with orders setting aside AAC's order either wholly or partly after appointed day, namely 10th July, 1978. To say that words `further action to be taken' used in sub-s. (2) of s. 39 would cover cases where Tribunal set aside order of AAC to pass fresh order in my opinion is to state proposition too broadly. When Tribunal sets aside order passed by AAC appeal gets restored to file of AAC for disposal de novo and AAC has to again follow entire procedure that he is required to follow earlier while disposing of original appeal. There is no difference in procedure to be followed. That fresh disposal would create same rights and liabilities on parties as earlier order. Against this order aggrieved party can file further appeal to Tribunal. 9. Such being case, it is, in my opinion, difficult to accept position that those words would cover cases where Tribunal sets aside orders of AAC for fresh disposal of appeal. It may be that Board in interests of smooth administration and in order to avoid dislocation of work, might have prescribed this procedure. Administrative convenience is of paramount importance as is different from legal interpretation. In this context much depends upon interpretation to be placed on direction given by Tribunal. That direction has to be read in juxtaposition with direction given in circular of Board. 10. Now again adverting to circular, one would get impression by going through circular that Board was prescribing authority to deal with situations arising out of orders passed by Tribunal pursuant to remand order. remand report or remand order contemplated in Board's circular have different connotation in law from order setting aside appeal. In case of remand order, unless matter is restored to file of AAC for redisposal, Tribunal continues to be in season of matter. But when matter is set aside by Tribunal, Tribunal not only disposes of appeal finally, but it has effects of effacing order of AAC, as if it never existed and that order would have no legal consequences till fresh order is passed, which is not case of remand. To my mind, Board was explaining situation arising out of remand orders though expressions `remand order' and `set aside' were both used in circular. Further, expression `set aside' used in paragraph relied on, must be understood in context of what was posed in question. question related as to how requirements of Tribunal in case of remand reports or to pass fresh order in pursuance to remand order have to be dealt with. It was in answer to this question that Board said that AAC would deal with it. Since situation arising out of setting aside of order was not raised in question, separate paragraph was added to explain that situation also treating both of them on par. It makes no difference as to who passed subsequent order so long as procedure provided by law is followed. Understood in this light words any action required to be taken used in s. 39(2) could not include orders of set aside because in those cases, what is to be done is not to give effect to direction of Tribunal but giving fresh hearing reconsidering matter, appreciate fresh evidence and then come to fresh conclusions. It is not like rectification of mistakes or complying with direction of ministerial nature. Thus words used in s. 39(2) cannot cover case of appeal which was set aside by Tribunal in toto. 11. It may also be useful to notice provisions of s. 246(3) which also dealt with situations arising out of creation of this new appellate authority. Sec. 246(3) is in following terms: (3) "Every appeal against order specified in sub-s. (2) which is pending immediately before appointed day before AAC or Commissioner and any matter arising out of or connected with such appeal and which is so pending shall stand transferred on that day to Commissioner(A) and Commissioner(A) may proceed with such appeal or matter from stage at which it was on that day: Provided that appellant may demand that before proceeding further with appeal or matter previous proceeding or any part there of be reopened or that he be reheard." essence of this sub-s. 246(3) is that in every appeal pending on or before 10th July, 1978 before AAC or Commissioner, if any action arising out of or connected with such appeal is to be taken that is to be taken by Commissioner(A), to whom all those appeals were transferred. Commissioner(A) is to start from stage at which appeals were left by preceding authority. However, right was given to assessee to demand that before proceeding further with appeal or matter previous proceedings or part thereof could be reopened. If by sub-s. 3 of s. 246 all matters arising out of pending appeals are to be disposed of only by new appellate authority, namely Commissioner(A), it does stand to reason that even matters set aside by Tribunal requiring AAC to deal with matters afresh must have to be dealt with by new appellant authority. dividing line between jurisdiction of AAC and jurisdiction of Commissioner(A) appears to be appointed day. Except for administrative convenience there is no other conceivable reason as to why appeals set aside by Tribunal even after appointed day should not be dealt with by Commissioner(A) provided requirements of jurisdiction are satisfied, namely income etc. If income is below jurisdiction of Commissioner(A) perhaps AAC has to deal with it because it may be that legislature wanted that senior officer like Commissioner(A) should not unnecessarily be burdened with small matters. But i f income is more than stipulated limit, then it makes no difference whether appeals afresh and apply his mind independently just like he applies his mind to case when Tribunal sets aside order and restores it to file of Commissioner(A). 12. It is only for sake of convenience and uniform procedure that Board had issued circular but Board was not by issuing that circular expressing view that Commissioner(A) in such circumstances would be less competent to dispose of appeal than AAC. That apart there is very great substance in argument of learned counsel for assessee, that ITO submitted to jurisdiction of Commissioner(A) and having allowed him to proceed with appeal and dispose it of on merits, he should not have raised this point of jurisdiction before Tribunal for first time. Commissioner(A) assumed jurisdiction not at instance of assessee but at instance of Department itself. If we turn to order passed by Tribunal direction of Tribunal was very categorical and clear that whole assessment was set aside to be redone in accordance with direction given by Board in earlier circular dealing with provisions of s. 40A(3). As I have pointed out earlier whole appeal got restored to file of officer, who was holding jurisdiction at that time over file. At that time, officer who was holding jurisdiction over file was Commissioner(A) and not AAC because Commissioner(A) has dealt with other appeals of assessee alongwith these appeals, as pointed by ld. Accountant Member in his order. 13. I may also pointed out another point that occurred to me while reading paragraph starting with words `likewise'. That paragraph was dealing with two situations, one situation where Tribunal had passed order setting aside orders of AAC after appointed day, other was situation where order of Tribunal was passed setting aside order of AAC before appointed day. In former case it was said that s. 39(2) would cover those appointed day. In former case it was said that s. 39(2) would cover those cases meaning thereby that it would be AAC, who would be authority to dispose of further appeals. In latter case it was pointed out that it would be Commissioner(A) who would be authority to deal with appeals. Reason given was that in latter case appeal would be deemed to be appeal pending immediately before appointed day. If appeal is deemed to b e pending with authority as consequence of order passed by Tribunal setting aside appellate order, it would be so even when it is before appointed day or after appointed day. Thus, appointed day would not make any difference insofar as pendency of appeal is concerned, except administrative convenience. If before first appellate authority appeal is deemed as pending as consequence of order passed by Tribunal, then that authority alone has to deal with matter. In this case, Tribunal set aside order of AAC and restored appeal to file of AAC. By reason of jurisdictional changes in meantime AAC ceased to have appellate jurisdiction over these files because of income factor and Commissioner(A) that was to deal with appeal and not AAC. Otherwise it would lead to incongruous results. 14. It is in this context that experience gained by senior officer would become relevant. If appeal is to be disposed of afresh, no grievance can be said to have been caused to interest of Department, if senior officer deals with these appeals. In fact that authority was created only for purpose of dealing with higher income cases like one in case before us. learned Accountant Member, was thus right when he observed that Department should not have taken up this hypertechnical point. It has also become purposeless, particularly in case, for reason that merits of appeal have still to be dealt with because ld. Judicial Member did not express his opinion on merits. To decide merits, matter has to go back either to regular Bench or to AAC again. Since in any case, merits have again to be gone through, it makes little difference whether AAC applies his mind once again or Tribunal. All points that Department desires to urge, can be placed before Bench, and Bench will hear those objections consider evidence and given its decisions and reasons therefor. It need not for purpose go before lower authority except for technical reasons. In this view, question of jurisdiction in way become academic. 1 5 . For these reasons and for reasons that word `any action required to be taken' cannot be said to embrace rehearing of appeal de novo. I am of considered view that view taken by learned Accountant Member is justified and I would agree with it. 16. Since this matter has not been disposed of on merits by Bench, now matter will go before regular Bench to decide issue of jurisdiction in accordance with opinion of majority and then on merits. *** INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX v. PALIWAL GLASS WORKS